Is your client selling real estate or a business and expecting a lump sum payment at close of escrow? If so, a tax liability (ouch) may be incurred in the year of sale.
Your client may wish to consider a Structured Sale Annuity, and enjoy deferred capital gains tax treatment by the IRS. Like a 1031 exchange, the seller must not be in actual or constructive receipt of sale funds at the time of the structured sale. Your client determines the length of the annuity and the amount of each payment. Your client can defer gains while enjoying a fixed income that can begin immediately.
There are no associated charges with the purchase or management of the funds by the Life Insurance Company or broker placing the annuity.
How does it work? Once the sales transaction is completed, the buyer immediately assigns all or a portion of the sales proceeds to an Assignment Company (like a 1031 Accomadator). The amount is determined by the seller's tax advisor as to amounts and eligibility for a Structured Sale. The Assignment Company purchases an annuity contract from a Life Insurance Company, and directs the company to make payments to the seller.
To good to be true? There are some IRS restrictions but they are manageable, and the minimum the Life Insurance Companies will accept is $100,000. A simple one page sales agreement between the buyer and seller includes the necessary language allowing for the structure, with the terms of the agreement governing the payment schedule.
The Structured sale also can be used for jewelry, wine, art, etc. sales.
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